Air Canada to buy up to 109 Boeing 737 MAX planes

Tim Hepher, Susan Taylor

3 Min Read

Passengers walk past Air Canada planes on the runway at Pearson International Airport in Toronto April 13, 2012. REUTERS/Mike Cassese

(Reuters) - Air Canada ACb.TO said on Wednesday it will purchase up to 109 of Boeing Co’s (BA.N) 737 MAX under its narrow-body fleet renewal plan, a major win for the aircraft maker and significant shift in supplier for Canada’s largest carrier.

The deal marks a substantial competitive victory for Boeing over Airbus and a rebound on its home turf after Airbus displaced it at low-cost Mexican airline VivaAerobus in a fierce contest earlier this year.

Boeing said once finalized, the firm order for the 61 737 MAX aircraft is expected to be worth $6.5 billion at list prices.

Aircraft are typically sold below the list price, especially when manufacturers are trying to persuade an airline to switch suppliers. But major plane makers also have the firepower to cut attractive deals when necessary on their best-selling aircraft and still make money.

The deal includes commitments, options and rights on another 48 planes as well as an agreement for Boeing to purchase up to 20 of Air Canada’s fleet of 45 Embraer (EMBR3.SA) E190 aircraft.

Montreal-based Air Canada’s mainline fleet of single-aisle aircraft includes 41 Airbus A320, 35 A319 and 10 A321 jets, according to its website, leaving only a handful of Airbus planes once completed.

“This is a generational decision. This is the plane that your grandchildren will be flying on,” said Chris Murray, analyst at AltaCorp Capital. “It’s a strong vote of confidence in the 737 MAX.”

Airlines rarely switch between different aircraft suppliers due to the high costs associated with training, maintenance and parts.

The decision marks the climax to a bruising and widely watched campaign between the world’s dominant plane makers.

Airbus had more orders than its U.S. rival for the first 11 months of the year, but it is difficult to say who will dominate the 2013 order book as recent deals could sway the balance.

Air Canada said it will be reviewing its options for the next six months for the remaining 25 Embraer E190 planes. Industry analysts have said those could be replaced by the brand-new, domestically produced Bombardier CSeries or Embraer E2 family.

With additional reporting by Solarina Ho; Editing by Jeffrey Hodgson and Gunna Dickson